(Bloomberg) — Sovereign bonds are rising around the world as concern the Middle East conflict will derail global economic growth revives demand for beaten-down government debt.<\/p>\n
US Treasuries advanced with Australian and Japanese bonds in Asian trade on speculation that surging oil prices may be just a harbinger of a protracted global fuel shortage. That\u2019s helping boost demand for government debt that until recently had been under selling pressure as fears over quickening inflation outweighed their traditional haven appeal.<\/p>\n
\u201cThe market is now letting its imagination run wild about what the world might look like in a month\u2019s time if there is no resolution by then\u201d to the Middle-East war, said Gareth Berry, a strategist at Macquarie Group Ltd. \u201cParallels with Covid are already being identified as economies at risk of shutting down \u2014 this time due to lack of fuel.\u201d<\/p>\n
The bond rally comes after weeks of selling that was driven by surging oil costs and concern over potential central bank interest-rate hikes. The recent shift in focus toward slowing economic growth is easing fears that central banks will need to adopt an aggressively hawkish stance to control inflation.<\/p>\n
Yields on Treasury two-year notes, among the securities most sensitive to shifts in monetary policy, fell three basis points to 3.88%, after sliding seven basis points on Friday. Those on benchmark 10-year debt dropped four basis points to 4.39%.<\/p>\n
Australia\u2019s three-year yields slid as much as nine basis points to 4.71%, while Japanese two-year yields declined two basis points to 1.36%.<\/p>\n
What Bloomberg Strategists Say…<\/p>\n
\u201cThe bull-steepening trend is likely to extend as investors pivot toward concerns about a growth slowdown after spending much of March pricing in a war-induced surge in inflation expectations\u201d<\/p>\n
Garfield Reynolds, Markets Live strategist<\/p>\n
Some of the biggest bond funds in the US including Pacific Investment Management Co. say financial markets are underestimating risks the Iran war will trigger a sharp slowdown. Goldman Sachs Group Inc. said the probability of a downturn over the coming year has risen to about 30%.<\/p>\n
Wall Street veteran Ed Yardeni said bond vigilantes have mobilized globally since the start of the conflict, resulting in over-bearishness in some parts of debt markets.<\/p>\n
\u201cThe front end of the yield curve is priced for a tightening policy response that we doubt is coming, so we consider it to be oversold,\u201d Yardeni wrote in a research note, referring to Treasuries.<\/p>\n
US 10-year yields should only be around 3.90%, significantly lower than the current level of above 4.40%, according to Apollo Global Management.<\/p>\n","protected":false},"excerpt":{"rendered":"(Bloomberg) — Sovereign bonds are rising around the world as concern the Middle East conflict will derail global…\n","protected":false},"author":2,"featured_media":553752,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[27],"tags":[2213,7904,28,214419,15492,246123],"class_list":["post-553751","post","type-post","status-publish","format-standard","has-post-thumbnail","category-business","tag-basis-points","tag-bloomberg","tag-business","tag-fuel-shortage","tag-government-debt","tag-sovereign-bonds"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/posts\/553751","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/comments?post=553751"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/posts\/553751\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/media\/553752"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/media?parent=553751"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/categories?post=553751"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/tags?post=553751"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}